nep-pbe New Economics Papers
on Public Economics
Issue of 2010‒01‒30
nine papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Assessing the relationship between democracy and domestic taxes in developing countries By Hélène EHRHART
  2. Social Fragmentation and Public Goods Revisiting the Olson's Effect in Uttar Pradesh and Bihar By Catherine Bros
  3. Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax By Nobuo Akai; Hikaru Ogawa; Yoshitomo Ogawa
  4. The 2008 Financial Crisis and Taxation Policy By Thomas Hemmelgarn; Gaëtan Nicodème
  5. The cyclical trend of local public service governance: evidence from urban water management in Spain By Alberto Ruiz Villaverde; Miguel A. García-Rubio; Francisco González-Gómez
  6. A Review of Build-Operate-Transfer for Infrastructure Development- Some Lessons for Policy Reform By Gilberto M. Llanto
  7. Lifestyles and Preferences for (Public) Goods: Professional Football in Munich By Gabriel Ahlfeldt; Wolfgang Maennig; Michaela Ölschläger
  8. Do Migrants Improve Governance at Home? Evidence from a Voting Experiment By Catia Batista; Pedro Vicente
  9. Does Governance Matter? Yes, No or Maybe Some Evidence from Developing Asia By M. G. Quibria

  1. By: Hélène EHRHART
    Abstract: To what extent differences across developing countries in their domestic tax mobilization can be explained, in addition to the traditional determinants, by political economy factors and particularly by the political regime? Using a panel of 66 developing countries over the period 1990-2005, this paper provides econometric evidence that democracy matters for achieving higher domestic tax revenues which are much needed to finance public goods. It is especially the level of constraints on the executive which is of importance to counter the government's propensity to cave in for special interests and to be insufficiently welfare minded. We found that high levels of democracy are specifically needed in natural resource rich countries to make natural resource rents contribute to higher domestic tax revenues and no longer be an impediment to a sustained tax system.
    Keywords: Tax Revenues, democracy, developing countries
    Date: 2009
  2. By: Catherine Bros (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, CSH - Centre de Sciences Humaines)
    Abstract: A vast recent literature has stressed social fragmentation's negative impact on the provision of public goods. This is a key issue, given that public goods availability has been reckoned as crucial to economic development, while developing countries' societies often exhibit high degrees of fragmentation. Although it has been well established both empirically and theoretically that fragmentation is detrimental to collective action, two caveats ought to be considered. First, a high level of social fragmentation is often associated with greater inequality, which, as Olson pointed out, may be beneficial to collective action. In Olson's argument, should most of the public goods benefits accrue to a small number of group members, they are encouraged to invest in group activities, given that their stakes in the collective action are quite high. Second, should access to publicly provided goods be restricted to the elite, a positive relationship may be found between fragmentation and ethnically based patronage. Given that both patronage and inequality are common in developing countries, it is surprising that fragmentation has never been found to have a positive effect on the provision of public goods. This article aims at showing that not only does this positive relationship exist, but it is linked to the presence of wealthy individuals who are in a position to deny access to public goods to other groups members.
    Keywords: Political economy, public goods, collective action, inequality, Olson, Caste, India.
    Date: 2009–10
  3. By: Nobuo Akai (Osaka School of International Public Policy, Osaka University); Hikaru Ogawa (School of Economics, Nagoya University); Yoshitomo Ogawa (Faculty of Economics, Kinki University)
    Abstract: This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Considering a symmetric and two-region model of tax competition, where each region is allowed to choose either unit or ad valorem tax, we show that selecting unit tax as a policy instrument is the dominant strategy of governments. An interpretation of this result is clearly explained by the properties of the best response curves.
    Keywords: Tax competition, Unit tax, Ad valorem tax
    JEL: H20 H21 H77
    Date: 2010–01
  4. By: Thomas Hemmelgarn (European Commission.); Gaëtan Nicodème (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, ECARES, Université Libre de Bruxelles, Brussels, European Commission, CEPR and CESifo.)
    Abstract: The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between tax policy and the financial crisis. In particular, it reviews the existing evidence on the links between taxes and many characteristics of the crisis. Finally, it examines some possible future tax options to prevent such crises.
    Keywords: financial crisis, tax policy, taxation, fiscal stimulus, financial transaction tax, property tax.
    JEL: E62 F21 F30 G10 H20 H30 H50 H60
    Date: 2010–01
  5. By: Alberto Ruiz Villaverde (Universidad de Granada. Department of Applied Economics); Miguel A. García-Rubio (Universidad de Granada. Department of Applied Economics); Francisco González-Gómez (Universidad de Granada. Department of Applied Economics)
    Abstract: The level of public and private involvement in economic activity in societies has changed over time. One may talk about the existence of a cyclical trend in which the most important periods of public governance are replaced by periods in which private management dominates the situation. This phenomenon may also be observed in local areas. Some authors have pointed out the existence of an alternation in the provision of municipal services, resulting in periods dominated by governance compared to other stages dominated by private management. In order to illustrate this cyclical trend at local level, this paper intends to analyze the evolution of the governance of the Spanish water supply since the mid-nineteenth century to the present day. Recent evidence from the industry suggests the possibility that we may currently be witnessing a further change in the trend.
    Keywords: : Local Government, urban water supply, privatization, municipalization
    Date: 2009–10–10
  6. By: Gilberto M. Llanto (Philippine Institute for Development Studies)
    Abstract: The Philippines has used the BOT law, as amended to motivate private sector provision of infrastructure. Using examples from selected BOT projects in the country, the paper pointed out key issues constraining the successful implementation of the BOT approach to infrastructure provision. It also indicated several factors that were instrumental in forging an effective publicprivate partnership in BOT projects. The paper pointed out the need to address various issues, starting from the legal framework to the level of responsibilities of the government institutions that are involved in the project cycle, i.e., from project entry level to implementation and completion. Improvements should be introduced at the policy, legal and institutional frameworks in order to improve the usefulness of this approach to infrastructure development.
    Keywords: Build-operate-transfer, public-private partnership in infrastructure, contracts, risk-sharing, subsidy, guarantees, arbitration, dispute settlement
    JEL: H54 H50 O14
    Date: 2010–01
  7. By: Gabriel Ahlfeldt (Chair for Economic Policy, University of Hamburg); Wolfgang Maennig (Chair for Economic Policy, University of Hamburg); Michaela Ölschläger (Chair for Economic Policy, University of Hamburg)
    Abstract: This paper investigates the 2001 referendum on the Allianz-Arena, a professional soccer stadium in Munich, Germany, with respect to lifestyle-specific voter preferences. Using political party affiliation and milieu probabilities as proxy variables, we find that lifestyle-specific preferences, values and attitudes more significantly contribute to the explanation of voting outcome compared to traditional strata-orientated indicators of economic wealth. Thus, lifestyle, preferences, tastes and attitudes are not proportionally related to income. Results are robust to stadium proximity effects and spatial dependency.
    Keywords: Lifestyle, Milieu, Referendum, Stadium, Munich
    JEL: D72 H40 P36 R58
    Date: 2009
  8. By: Catia Batista (Department of Economics and Institute for International Integration Studies, Trinity College Dublin; IZA); Pedro Vicente (Department of Economics and Institute for International Integration Studies, Trinity College Dublin; CSAE-Oxford; BREAD)
    Abstract: This paper tests the hypothesis that international migration experiences may promote better institutions at home by raising the demand for political accountability. In order to examine this question, we use a simple postcard voting experiment designed to capture the population’s desire for better governance. Using data from a tailored household survey, we examine the determinants of voting behavior in our experiment, and isolate the positive effect of international emigration on the demand for political accountability. We find that this effect can be mainly attributed to the presence of return migrants, particularly to those who emigrated to countries with better governance.
    Keywords: international migration, governance, political accountability, institutions, effects of emigration in origin countries, household survey, Cape Verde, sub-Saharan Africa
    JEL: F22 O12 O15 O43 P16
    Date: 2009–12
  9. By: M. G. Quibria (Singapore Management University)
    Abstract: This paper seeks to explore the relationship between economic growth and governance performance in Asian developing economies. This exploration yields some interesting conclusions. First, notwithstanding its tremendous economic achievements, the state of governance in Asia is not stellar by international comparison. Indeed, a majority of these countries seem to suffer from a governance deficit. Second, contrary to our expectation, data do not suggest any strong positive link between governance and growth- paradoxically, countries that exhibit surpluses in governance on average grew much slower than those with deficits. The paper ends with some conjecture about this apparent paradox.
    Keywords: Governance, Institutions, Growth and Asia
    JEL: O10 O40 O53
    Date: 2010–01

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